Nabilah S
Privatisation should only occur when analysis demonstrates that an asset would be more efficiently managed by the private sector than the public sector, according to ANZ Group senior international economists Dr. Kishti Sen, Catherine Birch, and Tom Kenny in the bank’s research publication Pacific Insight.
The economists noted that when an asset being sold has monopoly characteristics—meaning price-setting power rests with asset owners, which is often the case for ports, water, and electricity networks—effective regulation is necessary to prevent post-sale pricing from placing excessive financial burdens on users in pursuit of supernormal profits.
They emphasized that it must be proven that the projects intended to be funded through privatisation proceeds will deliver clear net economic benefits.
“Without adherence to these conditions, there is a risk that capital recycling becomes an inefficient and unsustainable method of raising infrastructure finance, where assets that are equally efficient under public ownership as in private hands are sold, and the resulting funds are allocated to projects with minimal net economic benefits,” the senior economists stated.
In Fiji’s case, asset recycling or privatisation would not necessarily result in the loss of Fijian ownership if it were carried out in partnership with the Fiji National Provident Fund (FNPF), other Fijian investors, or through long-term leases.
“A review of existing government-owned infrastructure, property, and other assets would be required to assess whether any are suitable for privatisation,” the economists stated.
They explained that proceeds from such sales could then be allocated toward funding new infrastructure projects or rehabilitating ageing infrastructure.
In recent years, capital recycling—also known as asset recycling—has emerged as a strategy to enhance the public sector’s capacity to finance infrastructure.
Under this approach, governments privatise or lease out an existing, income-generating public sector asset on a long-term basis and use the resulting funds to develop new assets, hence the term “asset recycling.”
